– Signed new leases totaling 3.1 million square feet at an average
re-leasing multiple of 3.9x –– Ended year with nearly $1.0 billion of cash on hand and committed
capital –– Subsequent to year end, signed a master lease with successor to
Sears Holdings for 51 locations –

Seritage Growth Properties
SRG, +1.52%
(the “Company”), a national owner
of 232 retail and mixed-use properties totaling approximately 36.3
million square feet of gross leasable area (“GLA”), today reported
financial and operating results for the quarter and year ended December
31, 2018.

Summary Financial Results

For the quarter ended December 31, 2018:

Net loss attributable to common shareholders of $56.0 million, or
$1.57 per share

Total Net Operating Income (“Total NOI”) of $34.1 million

Funds from Operations (“FFO”) of $7.0 million, or $0.13 per share

Company FFO of ($4.4) million, or ($0.08) per share

For the year ended December 31, 2018:

Net loss attributable to common shareholders of $78.4 million, or
$2.20 per share

Total NOI of $143.1 million

FFO of $24.1 million, or $0.43 per share

Company FFO of $15.7 million, or $0.28 per share

“We are very pleased with our fourth quarter performance, which included
878,000 square feet of new leasing at an average re-leasing multiple of
4.0x for space previously occupied by Sears. Since inception, we have
leased nearly 8.0 million square feet at an average re-leasing multiple
of 4.1x, and completed or commenced 97 redevelopment projects totaling
approximately $1.5 billion of total capital investment with targeted
incremental yields of approximately 11% on an unlevered basis,” said
Benjamin Schall, President and Chief Executive Officer. “To fund this
transformative redevelopment program, we have maintained access to
multiple sources of liquidity and currently have $533 million of cash on
hand and a committed $400 million incremental funding facility. Further,
having generated over $230 million in 2018 through the formation of
joint ventures and divestiture of smaller market assets, we continue to
recycle capital into the highest value creation opportunities in our
portfolio.”

Mr. Schall continued, “We have rapidly diversified our tenant base, with
over 70% of our annual base rent under lease now derived from
diversified, non-Sears tenants (up from 20% at inception). In February,
we signed a new master lease with the successor to Sears Holdings that
maintains 51 locations leased to Sears or Kmart, which will become
effective following the rejection of the existing Master Lease with
Sears Holdings. The new lease provides Seritage with expanded rights to
execute on our redevelopment initiatives. As we look forward, we expect
to continue to utilize our platform and expand our relationships with
growing retailers, mixed-use developers and institutional capital
allocators to further unlock embedded value through our retail
redevelopments and larger mixed-use pipeline.”

Operating Highlights

Rental Income

During the year ended December 31, 2018, the Company added $45.2 million
of new diversified, non-Sears income and increased annual base rent
attributable to diversified, non-Sears tenants to 70.9% of total annual
base rent from 52.2% as of December 31, 2017, including all signed
leases and net of rent attributable to the associated space to be
recaptured.

The table below provides a summary of all the Company’s signed leases as
of December 31, 2018, including unconsolidated joint ventures presented
at the Company’s proportional share:

(in thousands except number of leases and PSF data)

Number of

Leased

% of Total

Annual

% of Total

Annual

Tenant

Leases

GLA

Leased GLA

Rent

Annual Rent

Rent PSF

Sears Holdings (1)(2)

105

12,619

56.0

%

$

61,341

29.1

%

$

4.86

In-place diversified, non-Sears leases (2)

236

5,043

22.4

%

66,200

31.4

%

13.13

SNO diversified, non-Sears leases (2)(3)

170

4,852

21.6

%

83,297

39.5

%

17.17

Sub-total diversified, non-Sears leases

406

9,895

44.0

%

149,497

70.9

%

15.11

Total

511

22,514

100.0

%

$

210,838

100.0

%

$

9.36

(1)

Number of leases reflects number of properties subject to the 2015
Sears Holdings Master Lease and JV Master Leases.

(2)

Metrics include four properties subject to previously exercised
recapture notices and five properties under contract for sale.

(3)

SNO = signed but not yet opened leases.

Leasing

In 2018, the Company signed new leases totaling 3.1 million square feet,
representing a 17% increase over 2017 leasing activity, including
approximately 878,000 square feet signed in the fourth quarter at an
average base rent of $18.03 PSF (retail leases represented 664,000
square feet at an average base rent of $20.98 PSF).

Below is a summary of the Company’s leasing activity, including its
proportional share of unconsolidated joint ventures, as of December 31,
2018:

In 2018, the Company commenced projects totaling $382 million, including
19 new redevelopments and the expansion of seven previously announced
projects. This activity included three new projects representing $65.0
million of capital investment in the fourth quarter.

Below is a summary of the Company’s announced development activity from
inception through December 31, 2018, presented at 100% share and
including certain assets that have been monetized through sale or joint
venture:

(in thousands)

Estimated

Estimated

Estimated

Number

Project

Development

Project

Projected Annual Income (2)

Incremental

Estimated Project Costs (1)

of Projects

Square Feet

Costs (1)

Costs (1)

Total

Existing

Incremental

Yield (3)

< $10,000

28

2,182

$

125,600

$

127,900

$

23,400

$

5,700

$

17,700

$10,001 - $20,000 (4)

32

3,721

439,000

458,900

63,100

15,300

47,900

> $20,001

22

3,738

803,100

861,900

115,100

23,100

91,900

Announced projects

82

9,641

$

1,367,700

$

1,448,700

$

201,600

$

44,100

$

157,500

10.5-11.5%

Acquired projects

15

63,600

63,600

Total projects

97

$

1,431,300

$

1,512,300

(1)

Total estimated development costs exclude, and total estimated
project costs include, termination fees to recapture 100% of certain
properties.

(2)

Projected annual income includes assumptions on stabilized rents to
be achieved for space under redevelopment. There can be no assurance
that stabilized rent targets will be achieved.

(3)

Projected incremental annual income divided by total estimated
project costs.

(4)

Includes Saugus, MA project which has been temporarily postponed
while the Company identifies a new lead tenant.

Transactions

In 2018, the Company contributed its assets in Santa Monica (CA), La
Jolla (CA) and West Hartford (CT) into three joint ventures with
institutional capital partners representing a total transaction value of
$362 million, or $744 PSF, and generated $117.0 million of gross
proceeds.

In 2018, the Company also sold 21 properties, primarily those in smaller
markets, totaling 2.1 million square feet that generated gross proceeds
of $114.3 million, or $54 PSF. These transactions included five
dispositions in the fourth quarter that generated gross proceeds of
$47.3 million, or $78 PSF.

Balance Sheet

On July 31, 2018, the Company entered into a new $2.0 billion term loan
facility with Berkshire Hathaway Life Insurance Company (the “Term Loan
Facility”). The Term Loan Facility, which matures on July 31, 2023,
provided for an initial funding of $1.6 billion at closing and includes
a committed $400 million incremental funding facility (subject to
certain conditions).

The Company used a portion of the proceeds from the initial funding to
fully repay its outstanding mortgage loan and unsecured term loan. The
Company expects the remaining proceeds from the initial funding, as well
as borrowings under the incremental funding facility, will be used to
fund the Company’s redevelopment pipeline and to pay operating expenses
of the Company and its subsidiaries.

As of December 31, 2018, the Company had nearly $1.0 billion of
identified liquidity, including $532.9 million of cash on the balance
sheet, the $400 million incremental funding facility (subject to certain
conditions) and assets under contract for sale for anticipated gross
proceeds of $59.8 million (assets under contract for sale are subject to
customary closing conditions and there can be no assurance that such
transactions will be consummated).

The Term Loan Facility includes certain financial metrics, including
fixed charge coverage ratios, leverage ratios and a minimum net worth,
that could be negatively impacted by a loss of revenue from Sears
Holdings, including if the 2015 Sears Holdings Master Lease is rejected
and the Holdco Master Lease becomes effective. A failure to satisfy any
of these financial metrics will require the Company to seek lender
approval to monetize assets via sale or joint venture and also provide
the lender the right to request mortgages on its real estate collateral.
The failure to satisfy any of these financial metrics will not result in
an event of default, mandatory amortization, cash flow sweep or any
similar provision.

Dividends

On October 23, 2018, the Company’s Board of Trustees declared a fourth
quarter common stock dividend of $0.25 per each Class A and Class C
common share. The common dividend was paid on January 10, 2019 to
shareholders of record on December 31, 2018. Holders of units in
Seritage Growth Properties, L.P. (the “Operating Partnership”) were
entitled to an equal distribution per each Operating Partnership unit
held on December 31, 2018. On October 23, 2018, the Company’s Board of
Trustees also declared a preferred stock dividend of $0.4375 per each
Series A Preferred Share. The preferred dividend was paid on January 14,
2019 to holders of record on December 31, 2018.

On February 20, 2019, the Company’s Board of Trustees declared a first
quarter common stock dividend of $0.25 per each Class A and Class C
common share. The common dividend will be paid on April 11, 2019 to
shareholders of record on March 29, 2019. Holders of units in the
Operating Partnership are entitled to an equal distribution per each
Operating Partnership unit held on March 29, 2019. On February 20, 2019,
the Company’s Board of Trustees also declared a preferred stock dividend
of $0.4375 per each Series A Preferred Share. The preferred dividend
will be paid on April 15, 2019 to holders of record on March 29, 2019.

The Company has announced that the Board of Trustees does not currently
expect to declare additional common dividends for the remainder of 2019,
based on its assessment of the Company’s investment opportunities and
its expectations of taxable income for the year. The Board of Trustees
will reevaluate this position at the end of 2019, if necessary, to
ensure that the Company meets its distribution requirements as a REIT.
The Company has also announced that the Board of Trustees expects that
cash dividends for the Company’s preferred shares will continue to be
paid each quarter.

Sears Holdings Bankruptcy and Holdco Master
Lease

On October 15, 2018, Sears Holdings and certain of its affiliates filed
voluntary petitions for relief under chapter 11 of title 11 of the
United States Code (the “Bankruptcy Code”) with the United States
Bankruptcy Court for the Southern District of New York (the “Bankruptcy
Court”). On February 11, 2019, Transform Holdco LLC (“Holdco”), an
affiliate of ESL Investments, Inc., completed the acquisition of an
approximately 425-store retail footprint and other assets and component
businesses of Sears Holdings on a going-concern basis.

On February 28, 2019, the Company entered into a master lease with
affiliates of Holdco (the “Holdco Master Lease”) comprising 51 of the
Company’s wholly-owned properties that remained subject to the master
lease with Sears Holdings (the “2015 Sears Holdings Master Lease”) at
the time Sears Holdings filed for bankruptcy protection.

A condition to the performance and obligations provided for in the
Holdco Master Lease is the rejection of the 2015 Sears Holdings Master
Lease. The 2015 Sears Holdings Master Lease will be rejected if either
(i) the Bankruptcy Court issues an order approving the rejection of the
2015 Sears Holdings Master Lease or (ii) the 2015 Sears Holdings Master
Lease is deemed to be rejected pursuant to the operation of the
Bankruptcy Code. As a result of this condition, there can be no
assurance as to the commencement of our and Holdco’s performance and
obligations provided for in the Holdco Master Lease and/or the timing
thereof.

The Holdco Master Lease, as executed, contains terms that are similar to
the 2015 Sears Holdings Master Lease with the addition of certain
enhanced landlord recapture and tenant termination rights. Additional
information regarding the Holdco Master Lease can be found in the Form
8-K filed with the Securities and Exchange Commission on February 28,
2019.

Financial Results

Below is a summary of the Company’s financial results for the quarter
and year ended December 31, 2018 and December 31, 2017:

(in thousands except per share amounts)

Quarter Ended December 31,

Year Ended December 31,

2018

2017

2018

2017

Net loss attributable to common shareholders

$

(56,038

)

$

(43,456

)

$

(78,375

)

$

(73,999

)

Net loss per share attributable to common shareholders

(1.57

)

(1.27

)

(2.20

)

(2.19

)

Total NOI

34,055

39,560

143,107

174,758

FFO

7,009

11,131

24,111

91,690

FFO per share

0.13

0.20

0.43

1.65

Company FFO

(4,438

)

11,522

15,746

81,797

Company FFO per share

(0.08

)

0.21

0.28

1.47

Net Loss

Net loss for both the quarter and year ended December 31, 2018 include
significant depreciation and amortization expense related to the
accelerated amortization of certain lease intangibles as a result of the
recapture of space from, or the termination of space by, Sears Holdings,
and the demolition of certain buildings for redevelopment. The quarter
and year ended December 31, 2018 also included additional accelerated
amortization of certain lease intangibles as a result of Sears Holdings’
bankruptcy filing.

Total NOI

The decrease in Total NOI for both the quarter and year ended December
31, 2018 was driven primarily by reduced rental income under the 2015
Sears Holdings Master Lease as a result of recapture and termination
activity at our properties. In addition, the Company sold 21
wholly-owned properties and 50% interests in three wholly-owned
properties in 2018, which contributed to the decrease in Total NOI.

Since inception, nearly 20.0 million square feet of leased space,
representing approximately $80.0 million of annual base rent, has been,
or will be, taken offline through recapture and termination activity. To
date, the Company has signed new leases with diversified, non-Sears
tenants for an aggregate annual base rent of $131.2 million across 7.9
million square feet of space. A majority of these newly signed leases
are categorized as SNO leases and are expected to begin paying rent
throughout the next 24 months.

FFO and Company FFO

The decrease in FFO and Company FFO for both the quarter and year ended
December 31, 2018 were driven by the same factors driving the decrease
in Total NOI, as well (i) lower straight-line rent as a result of
recapture and termination activity at our properties, (ii) the write-off
of certain straight-line rent receivables as a result of Sears Holdings’
bankruptcy filing, (iii) higher interest expense resulting from our debt
refinancing in the third quarter of 2018, and (iv) dividends related to
the $70 million preferred equity raise that was completed late in the
fourth quarter of 2017. In addition, FFO for the quarter ended December
31, 2018 included higher termination fee income which partially offset
the other factors driving the decrease in FFO, and both FFO and Company
FFO for the year ended December 31, 2018 were impacted by higher G&A
expenses, including personnel costs related to our growing platform and
certain legal and advisory costs related to Sears Holdings’ bankruptcy
filing.

Portfolio Summary

Below is a summary of the Company’s portfolio as December 31, 2018:

Wholly Owned

Unconsolidated

Portfolio

Joint Ventures

Total

Properties

206

26

232

Malls

94

24

118

Strip centers and freestanding

112

2

114

GLA (at share) (000s)

31,602

2,348

33,950

% leased

65.6

%

76.4

%

66.3

%

The unleased space as of December 31, 2018 included approximately 2.5
million SF of remaining lease-up at announced redevelopment projects,
and approximately 8.9 million SF of additional leasing opportunity at
properties throughout the Company’s portfolio.

Announced Development Projects

As of December 31, 2018, the Company had originated 82 redevelopment
projects since the Company’s inception. These projects represent an
estimated total investment of $1.45 billion ($1.37 billion at share), of
which an estimated $907 million ($849 million at share) remains to be
spent, and are expected to generate an incremental yield on cost of
approximately 11.0%.

The tables below provide brief descriptions of each of the redevelopment
projects originated on the Company’s platform since its inception,
including certain assets that have been monetized through sale or joint
venture:

Total Project Costs under $10 Million

Total

Estimated

Estimated

Project

Construction

Substantial

Property

Description

Square Feet

Start

Completion

King of Prussia, PA

Repurpose former auto center space for Outback Steakhouse, Yard
House and small shop retail

29,100

Complete

Merrillville, IN

Termination property; redevelop existing store for At Home and small
shop retail

132,000

Complete

Elkhart, IN

Termination property; existing store has been released to Big R
Stores

100% recapture; redevelop existing store and auto center for Ashley
Furniture, Bob's Discount Furniture, Burlington Stores and
additional retail and restaurants; a portion of the space has been
leased to Extra Space Storage and will be repurposed as self storage

A Supplemental Report will be available in the Investors section of the
Company’s website, www.seritage.com.

Non-GAAP Financial Measures

The Company makes reference to NOI, Total NOI, FFO and Company FFO which
are financial measures that include adjustments to accounting principles
generally accepted in the United States (“GAAP”).

None of NOI, Total NOI, FFO or Company FFO, are measures that (i)
represent cash flow from operations as defined by GAAP; (ii) are
indicative of cash available to fund all cash flow needs, including the
ability to make distributions; (iii) are alternatives to cash flow as a
measure of liquidity; or (iv) should be considered alternatives to net
income (which is determined in accordance with GAAP) for purposes of
evaluating the Company’s operating performance. Reconciliations of these
measures to the respective GAAP measures we deem most comparable have
been provided in the tables accompanying this press release.

Net Operating Income ("NOI”), Total NOI and
Annualized Total NOI

NOI is defined as income from property operations less property
operating expenses. The Company believes NOI provides useful information
regarding Seritage, its financial condition, and results of operations
because it reflects only those income and expense items that are
incurred at the property level.

The Company also uses Total NOI, which includes its proportional share
of unconsolidated properties. This form of presentation offers insights
into the financial performance and condition of the Company as a whole
given the Company’s ownership of unconsolidated properties that are
accounted for under GAAP using the equity method. The Company also
considers Total NOI to be a helpful supplemental measure of its
operating performance because it excludes from NOI variable items such
as termination fee income, as well as non-cash items such as
straight-line rent and amortization of lease intangibles.

Annualized Total NOI is an estimate, as of the end of the reporting
period, of the annual Total NOI to be generated by the Company’s
portfolio including all signed leases and modifications to the Company’s
master lease with Sears Holdings with respect to recaptured space. We
calculate Annualized Total NOI by adding or subtracting current period
adjustments for leases that commenced or expired during the period to
Total NOI (as defined) for the period and annualizing, and then adding
estimated annual Total NOI attributable to SNO leases and subtracting
estimated annual Total NOI attributable to Sears Holdings’ space to be
recaptured.

Annualized Total NOI is a forward-looking non-GAAP measure for which the
Company does not believe it can provide reconciling information to a
corresponding forward-looking GAAP measure without unreasonable effort.

Funds from Operations ("FFO") and Company FFO

FFO is calculated in accordance with NAREIT which defines FFO as net
income computed in accordance with GAAP, excluding gains (or losses)
from property sales, real estate related depreciation and amortization,
and impairment charges on depreciable real estate assets. The Company
considers FFO a helpful supplemental measure of the operating
performance for equity REITs and a complement to GAAP measures because
it is a recognized measure of performance by the real estate industry.

The Company makes certain adjustments to FFO, which it refers to as
Company FFO, to account for certain non-cash and non-comparable items,
such as termination fee income, unrealized loss on interest rate cap,
litigation charges, acquisition-related expenses, amortization of
deferred financing costs and certain up-front-hiring and personnel
costs, that it does not believe are representative of ongoing operating
results. The Company previously referred to this metric as Normalized
FFO; the definition and calculation remain the same.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of
the federal securities laws. Forward-looking statements relate to
expectations, beliefs, projections, future plans and strategies,
anticipated events or trends and similar expressions concerning matters
that are not historical facts. In some cases, you can identify
forward-looking statements by the use of forward-looking terminology
such as “may,” “will,” “should,” “expects,” “intends,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” or “potential” or
the negative of these words and phrases or similar words or phrases that
are predictions of or indicate future events or trends and that do not
relate solely to historical matters. Forward-looking statements involve
known and unknown risks, uncertainties, assumptions and contingencies,
many of which are beyond the company’s control, which may cause actual
results to differ significantly from those expressed in any
forward-looking statement. Factors that could cause or contribute to
such differences include, but are not limited to: our material exposure
to Sears Holdings and the effects of its previously announced bankruptcy
filing; Sears Holdings’ termination and other rights under its master
lease with us; competition in the real estate and retail industries;
risks relating to our recapture and redevelopment activities;
contingencies to the commencement of rent under leases; the terms of our
indebtedness; restrictions with which we are required to comply in order
to maintain REIT status and other legal requirements to which we are
subject; and our relatively limited history as an operating company. For
additional discussion of these and other applicable risks, assumptions
and uncertainties, see the “Risk Factors” and forward-looking statement
disclosure contained in our filings with the Securities and Exchange
Commission, including the risk factors relating to Sears Holdings. While
we believe that our forecasts and assumptions are reasonable, we caution
that actual results may differ materially. We intend the forward-looking
statements to speak only as of the time made and do not undertake to
update or revise them as more information becomes available, except as
required by law.

About Seritage Growth Properties

Seritage Growth Properties is a publicly-traded, self-administered and
self-managed REIT with 206 wholly-owned properties and 26 joint venture
properties totaling approximately 36.3 million square feet of space
across 48 states and Puerto Rico. The Company was formed to unlock the
underlying real estate value of a high-quality retail portfolio it
acquired from Sears Holdings in July 2015. Pursuant to a master lease,
the Company has the right to recapture certain space from Sears Holdings
for retenanting or redevelopment purposes. The Company’s mission is to
create and own revitalized shopping, dining, entertainment and mixed-use
destinations that provide enriched experiences for consumers and local
communities, and create long-term value for our shareholders.

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